During its first year, the company spent approximately $300,000 to catch 500 crocodiles. Of these, 300 crocodiles were sold and shipped to customers at a selling price of $1,000 per crocodile. Shipping costs of $50 per crocodile were paid for during the year. Customers were given liberal credit terms and only $160,000 from an equivalent 200 customers was collected during the first year. Ms. Maze estimated that as much as 20% of the sales price will be spent in collection costs and bad debts expenses. At the end of the first year, Mr. Cooper consulted with his other two colleagues and estimated that he could catch and sell 600 to 800 crocodiles for the next year. Because of the companys apparent success, Mr. Cooper wanted to expand its facilities. This meant getting funds to rent more boats and warehouse space. He believed that he could now overcome the skepticism of banks and ask for a loan. On January 2, 2009, Mr. Cooper notified Clyde Property Management that he no longer needed their current warehouse and office space. He would be vacating the properties by January 30th in order to move into larger facilities.

Show the journal entry to record the legal liability arising from the potential lawsuit and analyze it. (If you find there is no liability, show the entry needed if there were liability)